I have been thinking about this myself recently. I just got off the phone with Waterhouse and they explained it this way:
A limit order in itself would not cause shares to be called in to cover the potential sale of the stock. That is one of the reasons they have 3 days for settling a transaction. If you actually sell the shares then your shares must be retrieved from accounts that have borrowed them to short the stock. At that point, the short accounts may borrow stock from other margin accounts, up to the point where the pool of marginable shares is exhausted. Then the broker will call the shares and the short must buy the shares back and deliver them, or the broker will do it for them.
Got that. Good.
Now if you have not margined yourself to the hilt (hopefully we have some investors that follow the rule of using no more than 10% margin here !) then you can ask your broker to move your shares (or a part of them) back to your cash account. At that point the broker will retrieve your physical shares and place them in your cash account and will not be able to borrow them again. They can, however, borrow shares from the margin pool to replace the shares you just pulled back from the short account.
So in order to cause a short squeeze, almost everyone that has shares margined would have to move them to their cash accounts. As of September 8, there were only 180,000 shares short. This number may have risen since then, but it only represents a bit more than an average days trading volume. Not a huge short position.
Also remember that the SPO provided institutions and market makers with liquidity in shares (Sandler got a 200K over allotment) and short buyers would probably find the shares they needed.
At this point, it makes more sense to just let things progress. USAB is doing a fine job with their marketing plan and new alliances. E-machines was huge, I agree. Now we must let them deliver on new account growth. As I said before the stock price will take care of itself.
Regardless, if any of you out there can move your shares, then do so, you can always move them back later.
Was that clear ?
Michael |
